Airlines and other sellers have developed sophisticated revenue management systems (RMSs) to optimize revenue. Generally, when a flight is first added to an airline's flight schedule, the airline's revenue management system attempts to maximize revenue for the flight by establishing a plurality of fare classes and then allocating the number of seats and price assigned to each fare class. The revenue management system will thereafter continue to monitor the actual demand within each fare class relative to forecasted demand, to dynamically reevaluate the inventory allocation and pricing of each fare class for a given flight. In this manner, the airlines attempt to fly each aircraft as full as possible without allowing earlier-booking discount-fare passengers to displace later-booking full-fare passengers.
While conventional revenue management systems employ sophisticated tools to anticipate future travel, forecasting errors invariably lead to unanticipated excess capacity. In addition, an airline can utilize its revenue management system to forecast its anticipated excess capacity on a given flight associated with seats that are predicted to be empty. Furthermore, unexpected external events, such as a price war or extreme weather conditions, can also affect an airline's excess capacity. Thus, in an attempt to reduce such excess capacity, airlines periodically reevaluate the inventory allocation and pricing of each fare class for a given flight. An airline cannot simply discount the published fares for such unsold seats, however, without either starting a fare war or compromising its own underlying fare structure (i.e., without also reducing its full-fare prices for business travelers).
Although many airlines fill empty seats with “standby” passengers, this practice is typically limited to instances where some oversight on the part of either the passenger or the airline has occurred. For example, the passenger's flight may have been overbooked, the passenger may have missed an original flight, or the passenger may have purchased a ticket at or near the time of the flight. Moreover, standby travel is costly for the airline and is inconvenient for the passenger because there is no guarantee that the passenger will get to fly on the same day.
In addition, airlines attempt to sell excess capacity utilizing consolidators, who traditionally sell airline tickets at a discount. Since the terms of the relationship between the airlines and the consolidators are generally not flight specific and are typically defined months in advance, the sale of tickets through a consolidator does not provide a sufficiently dynamic mechanism for airlines to sell such excess capacity when actual demand fails to meet forecasted demand.
Previous attempts have been made to address the sale of excess capacity for items such as airline tickets. For example, U.S. Pat. No. 5,794,207 entitled “Method And Apparatus For A Cryptographically Assisted Commercial Network System Designed To Facilitate Buyer-Driven Conditional Purchase Offers” provides a system by which buyers may submit a price at which they agree to purchase an item, such as an airline ticket, and to be flexible with regard to the identity of the seller, the travel itinerary, etc. One or more sellers may be notified of the buyer's conditional purchase offer and a seller may accept the conditional purchase offer. A system of this type is available on the Internet at www.priceline.com. Priceline.com uses preferential pricing made available to it by sellers (who remain anonymous until the transaction is complete) to accept conditional purchase offers from buyers. A successful buyer at priceline.com is charged his or her offer price, while priceline.com purchases the ticket from the supplier at the preferential price. Priceline.com keeps the difference between the offer price and the preferred purchase price, and may also charge a fee from the buyer when a sale is completed. The priceline.com system allows sellers to anonymously make discounted sales below published price without disrupting normal sales channels.
Another system that has been available on the Internet at www.travelbids.com allows buyers to post a fare corresponding to a reservation for travel by the buyer, so that travel agents could find a more favorable fare and make the sale. In an alternative embodiment available on the TravelBids site from 1998 to 2000, a buyer could post a “Maximum Price Listing” of the maximum amount the traveler was willing to pay for travel without the need to make a prior reservation. Travel agents, consolidators, or the airlines themselves would then review the listings in a billboard fashion and try to respond with travel arrangements at or below the Maximum Price Listing to obtain the sale. Like priceline.com, the TravelBids site did not allow the buyer to review the details of the transaction, e.g., airline and itinerary, before being bound to make a purchase. However, the buyer could specify that the maximum price they were willing to pay was conditional upon certain factors. These factors might be the number of stops that are acceptable or the hours of acceptable travel, or even the particular airline carriers wanted by the buyer.